[Petrochemical Industry] NB latex price rising based on fundamental impro...

Kumho Petrochemical's plant in Yeosu, South Jeolla Province (Courtesy of Kumho Petrochemical)

The author is an analyst for NH Investment & Securities. He can be reached at yk.choi@nhsec.com -- Ed.

Even though the price of butadiene has peaked since late March, the price and spread of NB latex continue to rise through May. NCCs should enjoy profits through 1H26, driven by a sharp increase in oil prices, but they are expected to record losses in 2H26.

NB latex business enjoying fundamental Improvement, but NCC profits to prove temporary from surging oil prices

Based on preliminary export figures for May 2026 (May 1-10), NB latex spread stood at US$913/ton (+546.7% from the January average of US$141), driven by a sharp rise in NB latex prices stemming from an improved supply-demand balance. The sharp rise in raw material prices (such as butadiene) caused by the US-Iran war served as a trigger for the NB latex price increase. Although butadiene prices have been declining since peaking in late March, NB latex export price per ton has been trending up each month from its low in Dec 2025 through May 2026 (May 1-10).

Meanwhile, for general-purpose chemical products, production capacity continues to be expanding mainly in China, making it difficult for spreads to break above their current weak range. Although domestic NCCs turned profitable in 1Q26, this was due to rising chemical product prices caused by soaring oil prices and the resulting positive lagging effects, and inventory valuation gains. Excluding the effects of oil price fluctuations, NCCs lack the ability to generate sustainable profits. While NCCs are expected to display profits through 2Q26, losses are likely in 2H26 due to negative lagging effects.

Kumho Petrochemical preferred over NCCs in light of its expected benefit from NB latex business improvement

Investing in the petrochemical sector requires a comprehensive analysis—considering product-specific supply and demand conditions, the ability to pass on cost increases, and the potential to defend profitability in the event of future oil price declines—rather than a sector-wide approach. We maintain a conservative view on NCCs, while maintaining a positive outlook on Kumho Petrochemical, which is expected to benefit from NB latex business improvement and synthetic rubber product spread rebound.

YK.Choi